Q1 2020 Earnings Call
[music].
[noise], ladies and gentlemen, thank you for standing by welcome to the first quarter 2020, Apple Brian Corp. earnings Conference call at this time, all participant lines ARNA listen only mode.
After the speakers presentation, there will be a question and answer session to ask the question. During the session you only need the past Star then one on your telephone.
Please be advised that today's conference is being recorded if you acquire any further assisted please press star then zero.
I would now like to hand, the topics over to your speaker today Christine Hanneman.
Please go ahead.
Good morning.
This is Christine Hanneman senior director of Investor Relations.
Welcome to ACCO brands first quarter 2020 conference call.
Speaking.
Yeah on the call today, our board Elisman, Chairman, President and Chief Executive Officer of ACCO Brands Corporation, and Neil Kinnock, Executive Vice President and Chief Financial Officer.
Slides.
For the company. This call had been posted to the Investor Relations section or the ACCO brands Dot com.
We speaking about our result, we may refer to adjusted results.
Adjusted results exclude transaction integration and restructuring costs and reflect any just pre tax rate.
Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most.
Directly comparable GAAP measures or any earnings release and slide.
These statements are made.
Our forward looking statements are subject to risks and uncertainties and your actual results.
Could differ materially.
Among the factors that could cause actual results could differ materially from our forward looking statements is the scope.
Okay and duration of the Cobiz 19 pandemic government action in third party responses to it and the consequences for the global economy and its impact on our business operation results of operation financial condition and liquidity.
Please refer to our earnings release and FCC filing point.
Well nation of certain of these risk factors and assumptions.
Our forward looking statements were made as of today and we assume no obligation to update them going forward.
Following our prepared remarks, we will hold acuity session now I will turn the call over to Boris Elisman.
Good morning, everyone.
Yes, and expected to use of cash and Twentytwenty.
Then we'll take your questions.
Our first quarter is our smallest quarter of the year.
Sales were down 2.5%.
$384 million.
Collars.
Our adjusted EPS were seven cents.
One cents from last year.
These results were roughly in line with our expectations.
The.
Yes started well, but march sales softened, especially in the last two weeks.
Recall that 19 related business.
In school closures.
April.
Just typically the softest months of the year for our business.
Deteriorated further due to incremental global government mandates in business growth.
In addition to the timing of Easter.
As we manage our response to the pandemic.
Top priority is the health and safety of OEM. Please.
In mid.
March employees, who could do their job from home begin working from home.
Most of our production and warehouse facilities remain open to meet customer demand as we are designated again essential business in most jurisdictions, although many have reduced staff and hours.
Modified operating procedures at our production warehousing facilities.
Based on government guidelines and have taken.
Please for their efforts under these difficult conditions.
We have also undertaken many cost reduction initiatives to better align our cost structure.
That could impact of much lower near term demand.
These efforts are in addition to our normal productivity programs.
We're doing everything again in the short term to mitigate the impact of a pandemic to ensure the long term health and prosperity of our company and now employees.
We just amended our bank agreement to provide additional flexibility to cover the possible the impact of course of 19.
Neil will give you the specifics in a few minutes.
Our board of directors approved.
The second quarter dividend payment, which will be paid in June to shareholders of record.
Moving onto my comments regarding the second quarter.
And as many of you know our North America back to school seven occurs mainly in the second in early third quarters.
Manufacture, although half of that inventory in the us, 30% in Vietnam and less than 20%.
In China.
Our supply chain is running normally after some minor disruption in February and March in China do the factory closures.
Okay.
We currently don't foresee any significant supply chain issues.
Meeting back to school orders.
We were impacted by Amazon decision in mid March to stop replenishing inventory, what they deem to be non essential item.
This reduced our March sales by a few million dollars, but in mid April.
Amazon begin replenishing inventory on many of our items.
Also in March and continuing to April we have seen strong demand for products that aid working schooling.
Now using our products.
Let me I'll make some comments as to why I believe we're well positioned.
Withstand the current challenges.
Our management team has faced difficult economic conditions before it has been working for the last 10 years.
To create a more resilience company.
In 2008, 2009, we are primarily selling office products to large office supply stores.
Today, we are much more diversified global company.
Beginning with the acquisition of the meet consumer an office products business in 2012.
Our strategy is going to expand our global presence diversify our channels of distribution.
And add stronger brands.
And more differentiation to our product portfolio.
Brazil, this strategy through organic initiatives and with acquisitions.
As a result, our business now, 50% consumer with a higher consumable mix help your go to market channels and a broader range of customers.
This makes a better able to withstand economic disruptions, which we believe will disproportionately impacts the part of our business that is related to commercial office products, which is more susceptible to low demand and channel disruption.
Our financial situation is much different as well.
In 2008 2009, we're in a week financial position and it was difficult for us to borrow.
We end.
In 2019 in strong financial shape.
And at the end of the first quarter with over $90 million in cash.
And and to 150 million Undrawn on our 600 million committed credit facility.
As noted earlier, we also amended our bank debt maintenance covenant, which will add flexibility to our facility.
We have no debt maturities before May 2024.
Given our financial strength.
And then proactive steps we have take.
Okay, as we'll be able to the uncertainties and near and long term consequences of calling 19.
I am confident in our market.
Physician brands, our financial strength, our people and and our management team, which has experienced in dealing.
And with difficult time.
With that I will turn the call although were to Neil for review of the segments our outlook.
In other financial commentary and then I'll join him and answering your question.
Neil.
Thank you Barbara and good morning, everyone.
First quarter reported net sales decreased 3% due to adverse foreign exchange.
Excluding for Oneq and foreign exchange comparable sales decreased 4% as declines in Europe and the international segment.
In the central business in many countries and state.
So we've been able to continue manufacturing and shipping in many of our facilities as demand Warren.
However.
Due to soft demand and social distancing requirements. We are currently operating many of the.
Adjusted Netincome with 7 million down from 90 million in 2000 to 19.
L.C.D.P.S. with seven cents versus eight cents in 2019.
In the cold stuff.
[laughter].
And an unfavorable product mix primarily in Europe.
He refused gross margin in international with from the inclusion Oh for me without which segment margins would have been flat and gross.
Margins for the total business 50 basis points higher.
S G.N.A. expenses as incentive styles decrease 222.4% from 24.3%.
Improvement was primarily from lower incentive.
Cruise.
<unk> in any annual incentive bonus is this year in any segment as well as productions indiscretion.
Me spending.
Inclusion of Peroni, which has both love at first profit and S.P. a night an act 'cause average with a 50 basis points benefit.
The forces operating income 17.4 million.
That's a lost is 17.9 million and uprising laundry in in both use with school 0.5%.
<unk>.
He has a negligible impact one report it off breaking income and market.
However, Justin tax rate of 30.7% was in line with our anticipated 31% right for the full yeah.
They could lost yeah.
We still a strong sales growth in Kensington swing line called pets and five style product.
I'll back to school orders with strong and at this point, we expect back to school selling to mass merchants into etailers could be similar to last year.
However, we also expect produce sales traditional.
Commercial office products channels other retailers in the second quota.
[noise] North America operating income and operating margin group is the result of the absence of restructuring charges. This quota.
Now, let's turn to me.
Net sales increased 13% and comparable sales with down 10% excuse me impact.
<unk> 19 related business closures.
The business was hood beginning it did March as many economies in Europe shutdown, how many experiences significant slow down in new orders.
As well as an inability to deliver to some customers.
The me is adjusted operating income and adjusted operating margin.
Decline.
Bill, which added 14 million.
Excluding foreign exchange and ferrone comparable.
That sells decreased 8%.
The decline with the results of slowing customer orders you to cope with 19 business plan.
Oh, just as well as alto stock situations in Mexico related to Chinese supply chain issues.
[noise] International reported operating income the slightly higher than last year due to low S.G. lycos.
Ferrone had an immaterial impact from operating income.
Adjust.
<unk> operating income of 6 million decreased as the impact of Kobe at 19.
Partially offset by low restructuring charges.
Mhm, and low S.G.N.A., including lower incentive a cool.
Let's move now fill up balance sheet and cash flow.
In the first quarter, we used approximately 25 million [noise] in net cash from operating activities and 32 million of free cash flow.
Much of which is related to North America, and I.T. conversion, which became operational in early April.
I told her end, we had used 150 million about 600 million revolving credit facility primarily for seasonal borrowings.
The net leverage ratio with kids 0.8 times.
As far as mentioned.
Address the impact.
Because with nine team we have undertaken a number of cost reduction initiative to better line I'll cost structure would be expected decline in twentytwenty sales.
These initiatives includes.
<unk>.
Want temporary salary reductions for our executive.
Oh Board of directors senior leaders and all South worldwide. These reductions range from between 50, 210%.
All of the salary reductions will be in effect until the end of two at which point, we will decide whether or not we will need to continue based on company performance and economic conditions.
Two.
Indefinite spokesman ER Twentytwenty merit increases with a few exceptions way of required by law.
Three.
Eliminating the twentytwenty bonus accruals since our original financial objectives will not.
Be achieved.
Pool.
Fellows, because some of our global employees and temporary layoffs plus.
Some production and distribution employees due to love with a month.
We have also 'cause phone discretionary spending including most <unk>.
Mm.
What temporary in nature.
We will evaluate the need to extend adjust well convert these actions into more permanent change.
It is like during the course, depending on the economic and business situation.
Now, let's tend to our outlook.
It is difficult to full cost in this environment and that's we don't know enough to give full gear garden.
It is not a normal practice to get like coakley outlook, but we are not in normal times and we have more short 10 visibility belong to visit the let's see right now for all sales and profits.
<unk> April has been very soft.
We expect a second quarter sales to be down significantly.
Outlook for the second cool to sales decline is in the range of 25% to 40%, including 3% impact from adverse foreign exchange.
This is a very broad range because we did.
Don't know the pace or the timing of pre openings in recovery. However, we expect April to be the worst month and the second quarter.
Second call for a cast at E.P.S. are expected to be a loss of five cents towards positive seven cents.
Negligible impact from foreign exchange and for I mean.
We believe that all seasonal borrowings could be log true because lois sales in April will result in local elections from receivables in the quota and we also anticipating increased level of like payments.
In addition, we did not anticipate such a steep drop in demand will be placed orders to purchase finished goods for major early in the first quota.
Which is likely to result in elevated infantry levels at the end of the second quota.
A second house visibility is very limited, but demand is expected to continue to be down.
And will potentially restrict sales gimmick I I'll risk.
For the full year, we anticipated slowly improving demand level with a wide range of sales assumptions.
The business continues to generate a solid level of operating cash flow.
Well lowest sales reduced profit. They also do you saw level up investment to working capital and we will we feel confident that we will generate at least 120 million of operating cash flow for the full year and with Catholics expected to be 20 million.
Yeah, we will generate to at least 100 million in free cash flow.
We also mended a bank debt covenant to give us greatest financial flexibility as we managed through this crisis.
The net debt to keep it leverage covenant ratio has been increased to 4.75 times from 3.75 times.
The way through June 2021 to ensure that we remind compliant without covenants regardless of the situation.
While we may not need he added headroom, we believe that it was prudent to ensure that we could managed through whatever we need to without concern for tripping a covenant.
Yeah.
In summary at this point the second quarter back to school orders for mass merchant and eat Taylor salad of similar to last year, and we will monitor has a sell out put back to school products in the third quota as we expect students to go back to school in the pool.
They may be some variation in the timing of school openings bus is normal, but we do expect most schools will be open in the full.
Now, let's move on to Q. in a person I will be happy to take your question.
<unk>.
Rachel.
Thank you as a reminder to ask that question you only need to pass Star then one on your telephone.
Two left you all your question <unk>, that's how keen again that Istar, then why not feel like to ask that question.
I first question comes on the line William Road, There with Bank of America airline if not open.
Hi, This is maryanne for buildings for taking the question. So just sorry, you touch on it briefly but can you just expand on the house of your customers and what kind of changes that you've been making two payment terms.
You know, it's difficult to say I'll I'll customers very and now profile.
We have lots of customers.
Who are very healthy and who's sales are actually up and business is probably going to grow as a result.
And we have some customers that I'm wearing it specialty.
Channels.
And these are customers set up focused primarily on the.
Office supplies business.
That are likely to be stressed by the current economic challenges.
You know, it's hard to paint with a broad brush customers that we feel a higher risk we are having discussions with and apply cost them custom solutions for that particular environment and I mentioned that she is prepared remarks or sometimes it means.
We will reduce our sales to those customers in order to to protect our receivables.
Got it and then given just overall we can then are you feeling any pressure on price and if so what kind of.
Pressure do you expect going forward in this environment.
No there's no pressure on price.
In fact, I think I I think that'd be a crush on the other way.
Commodity environments very benign so we don't see any any inflation from the commodity costs.
[noise] on T.E. commerce channels, what kind of.
<unk> are you seeing anything specific cues to.
What products are being online versus what's typically being button stores any command changes with that or any color I guess or what you've seen with most of these shows going online.
Yeah, I mean online is clearly benefiting from in the calling environment, we seeing a rapid growth.
Ooh detail. It's you know in the first one or the approach triple digits for us.
And then our own direct to consumer sales or up 17.
<unk> in the first quarter. So not just third party I think there's demand are we seeing demand on line.
Yeah pretty much from from every angle. So clearly wanted a big benefits in this environment will be online sales.
That's all for me thanks, very much thank you.
Mm.
Thank you I'm next question comes along the line of Cranston again as well so now the game company, Yeah, a lot of south fan.
Thanks for taking my questions and.
<unk>.
Supervise guns for two to <unk>.
<unk> you just maybe I'm bored to talk a little bit about maybe inventory levels in the commercial side and and you know state start to reopen you you know those conversations change.
Outside of what you saw in April.
Yeah. It inventory overall right now is pretty low.
For us.
Yeah.
Yeah, that's slow for for a couple of reasons.
<unk>.
Oh, there was some supply chain disruptions in.
Really March.
I'm trying to.
Yeah.
Q1 inventory was in the lower place.
Hmm.
More of that to come into a house too Skinny may and June time frames and I've mentioned, we do it stops.
Oh, so cute.
A little bit higher level 11, toys, because the orders real place back into one I must say also I'm going to be down substantially.
When it comes to our customers they had taken the inventory gone by a lot as well because anticipating a lower level of sales. So one of the leaves and.
That April was such a soft spot.
In addition to just lower demand incremental just stocking with customers like doing as they anticipate lower demand in the future months as well.
Okay, and then just on a regional basis any.
Obviously free wide range of sales acquaintances through but you know if you just think about the region.
So that I apologize for.
Oh process through the segments of we're going to see <unk>.
Side of that the school selling if I look at dusk commercial environments.
<unk> similar.
Friends, Oh, similar weakness all over the World and then seasonally two two is going to be pretty low <unk> definitely a low quarter for me and most of international as well and that's not likely going to change.
I should take more questions and good luck with <unk>.
<unk>.
[laughter].
Thank you My next question toss on the line.
<unk> Oh, Kevin sign K. with parents and research Yeah, a lot of south.
Hey, good morning.
The <unk>.
It's just a curious about obviously April was was very soft, but did you see any stabilization in sales trends, maybe on a week to week.
Basis is <unk> you move throughout the month.
You know it is difficult to to tell because we don't do it yeah and you have compares on it.
On a weekly basis, we did see sales are better on the second half just overall of April sales were very very soft <unk> through Easter.
National countries, we are seeing discussion of openings and and actually some openings and early may in some of the U.S. States, we haven't seen any business in back of that yet, but yeah, certainly about about the opening what's going on and then.
Oh back to school selling shipments are really May June July so live with you know may and June falling into cute too.
We expect that to to help those two months.
Okay.
Okay, Alright, that's helpful.
<unk> that kind of.
Tales to my next question here you mentioned.
Some.
Countries in Europe.
<unk>.
Printing the tentatively reopen and I know, it's still very <unk> very early in the process, but.
Have you seen any green shoots a emerging in your sales trends from certain countries are beginning to reopen.
We haven't seen any green shoots a yet that Kevin <unk> countries are open and shipping which is a good thing you know for part Uh Huh.
March in early April, Italy, and Spain as a couple of other countries are pretty much completely shut down now they're open now warehouses that shipping. So I do expect that we will have stronger May then we had a in April.
Okay and then.
You mentioned the strong demand for certain work from home stay at home items.
Can you give us a sense is you know how much of.
Your portfolio a those items account for in maybe it'd be been able to address the out of stock items that that you mentioned there as well.
Yeah, if if we look at our.
Sales for those types of products, which is Kensington true sense durland. Some notebooks, it's probably in the range of 10% to 15% portfolio.
We are addressing out of stock issues, certainly we expect.
Made to be better by the demands being so strong that even athlete yet.
Additional supply of those Ah products. They go out very very quickly. So you know, it's it's a good thing and I'm I'm I'm profitable resolve of the <unk>.
Doc issues, but still the the overwhelming majority Rob portfolio is is down significantly in terms of sales.
Okay. It's.
Supply chain I takes a little bit that to recover. So these are good things I much rather be chasing supply then demand.
Back to school I feel very very competent then but you know in in in certain Kensington or a true sense of Derwinski was was still chasing supply.
Okay, and then just Leslie huh.
Just talk about the decision to declare driven in and you know I assume that you continue to are expected.
Continue paying one going forward.
So it sounds like at least you know a positive.
Signal of your financial.
Strengths, so just curious about that.
Yeah, we're very very confident in our operating cash flow and free cash flow dividend fit squarely at very important part of a total shareholder return and the board felt.
74, cute too that we should be paying a dividend and given a I'll view on the company in the future and the board will continue to evaluate in the corner of the basis, but but certainly.
Given the importance of dividends something something.
Drastic has to happen for us to the change of you on that.
Okay, great. Thanks for taking the questions.
Thanksgiving.
Thank you on next class.
[laughter] related to the covert crisis do you have any fears or worries that that could cause a faster shift to the generic side versus the brand inside.
No I'm not worried about that Joe I think though that the price increases that we're talking about a nominal.
And the increase are gonna be comparable to what everybody is doing everybody's.
Implementing similar policies and seeing the same cost increases.
Clearly, we'll need to remain competitive.
I would and all that scope I do expect to be a a pressure on increasing costs.
Raising prices okay.
Okay and could you just remind us what percent of revenue is derived from consumable.
Well, that's roughly 50% to folks plenty hoff, yeah, approximately 50%.
Okay.
So on that one.
And how has it.
If it has the.
Current crisis had any impact on some of the new product roll outs.
Guys were expecting to do this year.
We we are still committed to.
Innovation your product development.
Some other shutdowns getting shine earlier in a year delayed some of the interaction with suppliers that our manufacturing some of these new products for us. So I think some of these products will be delayed by a couple of months as a result.
And then.
The plus swans types of products so.
Derivatives and some of the minor changes I getting delayed two two pi year I can you imagine in his <unk> actually are reducing some of the cap acts that supports.
These less innovative products I bought the clue are the core group of innovative products of staying on schedule I was still committed to it, albeit there's gonna be a couple of months potential slept with just just you know business is not being able to operate as effectively as before.
I want to jump in on maybe looking at the contribution margin on that and then to leverage that you all are expecting I think some some quick math.
Neil maybe implies a 30% to 35% decremental margin on the sales decline into cue.
Am I on the ballpark with that.
Any.
Insights you'd like to share about how we should think about that flow through rate as we try and find tune our models for the balance of the you're here.
Yeah, you'll Matthews correct fragile, but that's of course after we've taken certain actions to reduce costs.
On a temporary basis so the.
<unk> cost reduction detrimental right <unk>.
Is actually in the low forties, and then they'll see we took a series of special actions to reduced executing I in the short to literally pay cuts except for that we've done which takes down into the around 50%.
Okay, great. Thank you.
Then maybe a big picture question <unk> you Boris just as you all it started to think about.
What the world looks like as we get back.
As the world.
<unk> I'm not sure going back to normal isn't the cards, yet, but but certainly I do expect a a recovery of some sort then there will be a likely more people working from home or more people schooling from home I'm more people buying through online and convenience channel. This.
Less less travel.
More emphasis on local products and services.
Probably more awareness of [noise], physical and mental health issues and a search for way to improve both.
So you know as a result of all of that we will be adapting to the changes in consumer and channel behavior and it's very unlikely.
<unk>.
Continued to invest in improve our d. to see capabilities around the world continued to partner with Taylor's not just with Amazon.
They obviously during that space, but also with a lot of locally etailers exist all over the world.
Transition hour sourcing.
In manufacturing over time to be closer to los selling locations.
Make additional investments in such a lot of categories eyes wellness.
Some crafts.
While computer and school products.
Change the color waves from.
More office color still more home colors conducive to home environment reduce the pack sizes and their size is.
In our cartons and shipments to facilitate a shipments and small up a a quantities and and market home locations as opposed to business locations. So those are just to knock out of initial thoughts another show ways, we're looking to to be more to until the.
Current changes in the viability seeing.
The over time, we will learn more and more about the more permanent changes in consumer behavior.
Well, we'll continue to to adjust.
That's very helpful. Thank you so much.
Thanks Bye.
[laughter].
Thank you on next question costs on the line of Hell Hole, then what's Barclays Yeah <unk>.
The question. This is as Brooker on four hail I wanted to.
Ask her about balance sheet I noticed you gave your long term of retarded or S. maintains it at two two and a half.
At times, you're close it now 2.8. So my first question I guess was on.
How you plan to get there and the time on that you know whether being debt reduction or Ah earnings growth in the future and then you know what you expect it to kind of be maybe a year end.
Yeah, and you know obviously.
Earnings is the most unpredictable thing between now and end of year because the cost of this viruses on predicted and then the response to it.
So I'm not going to give any target through the end of the we gave the guidance that we felt we could give and clearly to give leverage good. So that's a given any guidance and no no I'm intending to do that.
However, we do not anticipate the virus staying with us on a permanent basis and so as you move out of this year and you tune into normal level of activity over C.N.N. fool recover.
And once endings recovers and as we did point out we will planned to pay down that this year, we will m. deal with less debt and blue hopefully see a recovery buildings, and then <unk> <unk> clearly Oh, let oh Liberty they'll get will quickly come back into the right. So.
Thanks, and then for the for the Covenant relief did you have to give anything up to that you are you know which seems to be well within even the <unk> what the leverage covenant was before it was there anything specifically you gave up for that.
So so fundamentally the agreement well we stay within the original terms prior to this and then very similar.
The only changes.
Eight valuable base rate in the U.S., which will come into effect, but outside of that change the only trade change that because if we go above the old 3.75 leverage kept in which case, we would become constrained from purchasing shares <unk>.
She is.
But he wouldn't intend to do that isn't that short term anyway. When we're in that period. So it's an academic restriction.
And obviously there are a higher interest rate kids to the plot, if we get into that level as well.
Got it no. My last question is on <unk>. I guess you you are you seeing any additional costs that you're having to look at.
<unk>, what's going on the plants.
You know in relation to the.
June restrictions or cleaning it plans et cetera.
Do we think about that in relation to the 20 million of costs shoes, and the second quarter and then throughout the rest beer.
The the the 20 million.
That's a quarter is all in one includes all of the clustering cases versus cost reductions.
You know, we are seeing increase cost as where managing our response to call. It 19, and as I mentioned response and my prior question. Some of that we'll have to pass through in the form of a a high pricing and I anticipate those costs not to be short term cost I think.
The way, we work is going to change.
And but that will drive almost necessarily higher cost or or.
Lower productivity, which will translate into higher costs per unit. So some of that it's going to get pastoral and higher pricing.
Great. Thanks, guys.
<unk>.
Oh.
Thank you annex questions pass on the line of <unk> went jeffrey's yellow and it's not open.
Good morning, when wires.
When you look at the the range of sales down 25% to 40%.
In in line kind of what what we've been hearing from others <unk> what are the parameters or what.
<unk>.
Range, you know what what has to happen that we come in at the short end and you know.
Where do we come in at the at the long in terms of the pace of opening.
Returned back to work you know school, obviously not coming back. This this this spring here.
You know, it's really going to be guided by how.
The commercials saddle business a world do you know, possibly as we mentioned we saw why why do decline in in April.
Oh and by the commercial side of the business if businesses start opening up and they start wondering product and it's done on a Saturday broad scale multiple countries multiple states.
Yeah that we should crap to a.
Hello, and all that scale and asked you know they environments days.
Similar or if that opens up slower or if it reverts back let's say it opens up and then a couple of weeks later, there's a spike and there's going to be incremental shut down.
That will tend to push it towards the hi, or decrease number you know the back to school. That's a salad number so that's going to be roughly what it's going to be because the waters or mostly again, we're going to ship them in in May and June so that's not gonna battery a glow deal I'll.
Just the normal what chips in June versus the Sips of July thing about the the commercial side is going to have the biggest affect them.
Okay.
We look at the positive cash flow for the year, certainly <unk> pushing for for you guys used. It continues you pay the dividend any thought given to do bolstering. The cushion that you guys have your leverage is mature really low we've seen others.
In capital just to put cash on the balance sheet.
As a safety cushion and your thoughts on the capital structure with that.
Yeah, we have ample availability under a bank lines and so at the end of the quota we had 450 million of available credit on a revolving credit facility. So you didn't anticipate using anywhere near that amount. It was actually increased to allow.
And then a fire power and so so we have no particular needs to both feet right now we have ample liquidity and we have ample access to it so we're pretty happy with Oh liquidity position.
And you alluded to.
Question in terms of in a are you seeing some of the smaller competitors out there having financial difficulties is is there stuff coming to market in terms of the pipeline.
Yeah, I think it's it's it's probably pretty mature for things just to pop up all in the last a few weeks about things, obviously, well com just give them the by actual squeezed what's going on.
And and there's there's there's plenty of stuff out there.
The bar for all other walk additions has gone up for given what's going on so we will they tend to be like <unk> priority file for cats, though is Ah.
Dividends 2020.
Thank you very much guys appreciate it.
Thank you <unk>.
Thank you next question costs on the line I'll harm. It costs, then went C.W.S. financial Yeah <unk> okay.
Good morning could you talk about us that you're seeing any share a loss or any competitive pressures from mass merchants using lower priced competitors versus your higher quality products.
Hi, <unk> no, we we have not seen that.
You know, we mentioned well actually managed to the last stuff he areas that.
Private labeled where where what fatty tactical when it comes to private label.
And some years, we'll read some of you guys would lose that that's that's not any different.
And those decisions are made you know probably mom months in advance Ah. So this year I expect us to be.
Long a smaller role in in in private label products than we did last year for example.
So they about nine months ago, you know you now see a question we're not seeing incremental she I lost in fact, it's a little bit the other way around we're seeing some of our customers I haven't a difficult time back now getting some products, which is given to what's going on both due to a logistics day.
<unk> liquidity issues. So there could be a word term incremental opportunity for for our products given that we make a lot of them here in the U.S. or in other countries, where we do business.
Yeah, how are you managing capacity utilization.
Given the new one right now it's weak sales, but then eventually with things opening up.
How does how do you adjust Ah commercial in school equipment sales do you have enough in mentors for that.
Yeah, a little bit yeah, we don't think inventories an issue yeah. We have different plants that are focused on making different things. We'll have some plants right now that are on a full or partial follow.
I'll have a lower demand in these plans focused primarily on.
Commercial products for end of the year products.
And now we have some plants that are focused on back to school and they are in full swing really working not 24 seven in order to prebuilding employees necessary for for for about the school, so where we have various scale model and you know our employees.
They supported during this difficult times and my working with us to make sure that we can adjust our cost structure corporate we get on the expected that demand trends.
Okay. Thank you.
Thank you have it.
Thank you My next question concerning a line of data Chapel Hill contrast, yeah last out then.
Yeah Chapel Hill alignments on me. Please I mean, you Caroline.
Sorry, but that good morning.
When your family is you're doing well.
<unk> well thank you.
Why don't you just talk more about you know as we come out of his environment more of you can [noise].
Yeah, or you can kind of talk about the business in a recession did you know three six months or even longer just how it's changed versus the last recession, how your maybe prepared more or less in terms of product offering and private label and and you know kind of what the business looks like as we compared versus.
789 years ago.
Yeah, you know we think it's a very very different situation you know first of all we think.
The nature of this recession, there's gonna be probably deeper level, we saw in 2008 2009.
Nine time frame and and probably the broader affecting more businesses up and walk more countries than the last one did but we think our business isn't a much better shape and much more healthier to withstand whatever will come our way.
We have much more geographically diversified we have.
How much bigger part of our business that selling for mass Dan in detail than we did in the prior recession. They might think those channels will be the winters. In this particular time and and and <unk> will do just just fine.
Much more of our product portfolio is consumer both versus durables.
And and durables and the last recession to that huge head.
This is to stop buying a anything that's discretionary and they think that in in this environment, it's likely to do it to happen again, but again a much bigger portion of our business is that consume most everything that's going to withstand are they in what environment that quite well.
I.
I mentioned them I prepared remarks were seeing an increase demand in some of our product categories, you know Kensington true sense Ah Darwin.
Some of the five star notebooks and many of those things we didn't have before now portfolio. So you know I I feel very very confident in our ability to withstand this the recession. However, long it last.
You know, we'll look at best as an opportunity to.
To you know accelerate our differentiation versus competition and to expand the at a distance between us and and that had other competitors out there. We think that companies will want to consolidate their supply base, our our customers will want to consolidate their supplier base.
And they think given our strength in out of breath and out brands that will want to consolidate onto us. So, whereas you know it's going to be very very difficult and I don't underestimate that I think from a competitive standpoint, but much better shape and this can be actually a good opportunity for us.
Right. Thanks, so much the color.
Thanks, though.
Thank you that's kinda clear Sundays question and answer session I would not like the kind of all back to Los Alamos closing remarks.
Oh. Thank you Sir Thank you have any wants to your interest in that go brands.
Memorize the ramifications way see him from call. It 19 are very disruptive to our business, but we are confident in our ability to withstand this crisis Luke in longer term also remain confident about future and the ability to continue to position the company for growth and strong results for our share holders.
We'll be participating in sound, where show conferences and <unk> Road shows in the second quarter. Please that Christine Hannaman no. If you're interested in speaking with us. Thank you and will feel ethic you too.
Ladies and gentlemen that Sinclair and AIDS conference call. Thank you for participating you may have disconnect.
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